ELSTREE, England—(BUSINESS WIRE)—Aug. 2, 2006—
ARC International (LSE:
ARK), the world leader in
configurable multimedia subsystems and CPU/DSP processor cores, today
announced its unaudited financial results for the six months ended 30
June 2006.

Commenting on the company's performance, Carl Schlachte, president
and chief executive officer, said, "During the first half of 2006, the
company delivered a good financial performance by closing the highest
number of contracts in the company's recent history and aggressively
selling our newest configurable subsystems and processors. ARC has a
strong foundation that will support the company's continued growth
into the future.

"For the second half of 2006, ARC will focus on winning more tier
1 licensees while making strategic investments to boost our ongoing
sales and marketing efforts in key regions. We are optimistic about
the prospects for the company and confident about trading in the
second half of this year."

Commenting on the financial results, Victor Young, chief financial
officer, said, "We are seeing increased opportunities and new business
fuelled by our multimedia subsystems, as evidenced by the increase in
backlog and sales pipeline. Costs were slightly ahead of plan, due to
higher sales commissions related to the increase in revenues in Asia,
increase in professional fees, and other investments made in growing
ARC's subsystem offerings. Bookings in Asia increased by approximately
four times compared to the same period a year ago. We look for
continued revenue growth in the second half of 2006."

Statement from the President and Chief Executive Officer

Overview

During the first half of 2006 ARC delivered a good financial
performance and strengthened its position as the leader in
configurable processor technology. The results were driven by twenty
new processor license agreements for ARC's patented subsystems and
cores that will be designed into a range of high-growth applications.
ARC's licensee base now stands at 127 OEM and semiconductor companies
-- many industry leaders. Our newest products continue to sell well
and command higher per-agreement prices. Today the ARC(TM) 600 and 700
core families and ARC Media Subsystems contributed approximately 95
percent of total processor licence revenue, which completes the shift
in revenue away from lower value legacy products that the management
team set out to achieve starting in 2004.

In 2006 the configurable ARC Video and ARC Sound Advanced
Subsystems were introduced and licensed by companies for chips going
into next-generation consumer devices. ARC launched ConfigCon(TM), a
worldwide developers conference series designed to educate the
semiconductor industry on configurable processor technology and
increase the adoption of our configurable solutions. The first event
in Taiwan surpassed expectations, with almost 400 attendees and close
to 20 companies participating in the event.

Licensee Adoption of Configurability

ARC's patented configurable subsystems and processors help
companies developing semiconductor chips to gain a competitive
advantage by enabling the creation of highly differentiated, lower
cost products. These are reasons why industry analysts forecast that
chips based upon configurable solutions will grow more than five times
faster than chips using "fixed architecture" alternatives. ARC is
leading this trend and helping accelerate the adoption of
configurability globally. During the first six months of 2006,
companies that announced they took licenses for an ARC configurable
subsystem or core included:

-- Atmel Corporation -- has taken a license for the ARC Video
Subsystem. It will be designed into Atmel's next generation
products targeting consumer electronics multimedia
applications.

-- BiTMICRO Networks -- has taken a license for the ARC 700
family of configurable cores. BiTMICRO will use ARC's
configurable processors to develop low cost, next-generation
system-on-chip (SoC) devices for their state-of-the-art
E-Disk(TM) storage solutions.

-- RF Microdevices -- has signed a license agreement for the
configurable ARC, 600 core family, which will power future
products in RFMD's fast-growing product line of programmable
RF radios.

-- SMSC -- has taken a license for the ARC 600 family of
configurable processors for computing applications. The ARC
605 core is an optimal replacement for legacy 8-bit
microcontrollers, while the ARC 610D and 625D cores are cost
effective 32-bit CPUs/DSPs ideal for a wide range of general
purpose embedded applications.

-- TTPCom -- has taken a license for a configurable ARC 700 core.
TTPCom has combined the ARC 700-class processor with its
proven baseband technology to develop a highly optimized SoC
design for its 3G Cellular Baseband Engine (CBEmacro) product.

-- Undisclosed aerospace company -- has taken a license for the
configurable ARC 725D core for use in a government satellite
application. The ARC processor will enable the company's
designers to create a chip that is ideally suited to the
rigorous operating environment of space.

ARC's Configurable Multimedia Subsystems

ARC is the only company to provide configurable subsystems
specifically designed to meet the requirements of multimedia
applications. The ARC Media Subsystem family offers a range of audio,
video, and imaging solutions as a single integrated, configurable
platform. Each ARC Media Subsystem includes the necessary hardware,
software, and development tools needed to complete an ARC-Based design
and get to market quickly.

-- ARC Video Subsystem -- In February of 2006 the ARC Video
Subsystem was introduced. Within less than five months, six
companies took licenses for the product for chips that will be
designed into a range of multimedia consumer devices. This is
the fastest rate of adoption of any of ARC's standalone
microprocessor offerings.

-- ARC Sound Advanced Subsystem -- In March 2006 ARC introduced
the latest in its line of configurable multimedia subsystems:
ARC Sound Advanced. Ideal for devices needing high definition
audio capability, the ARC Sound Advanced Subsystem consumes
low power and is programmable to enable licensees'
differentiation to be added to the platform. Licensees include
Oki Electric of Japan, which adopted the ARC Sound Advanced
Subsystem for in-car audio applications.